Optimistic expectations for AI demand have once again outweighed concerns over Middle East tensions and inflation, leading to a rebound in Asia-Pacific chip stocks on Thursday. However, the South Korean stock market once again experienced a rollercoaster ride.
The KOSPI index opened 3.3% higher on Thursday, with gains subsequently expanding to 4%, before sharply narrowing to around 2%. The Nikkei 225 index also saw its gains rapidly widen to 1.9%. The MSCI Asia Pacific Index overall rose about 1%. Nasdaq 100 index futures, which had fallen earlier, subsequently turned positive, gaining 0.2%.
The immediate catalyst for this rebound was the subscription data for SK hynix's U.S. listing—oversubscribed by more than seven times, far exceeding market expectations. This drove its Seoul-listed shares up 6.6% for the day, with SK hynix shares surging more than 9% at one point during the session.
Semiconductor Stocks Experience Sharp Swings
Just earlier this week, the semiconductor sector was under selling pressure. Samsung Electronics reported a 19-fold surge in profits, but this stellar data still failed to impress investors, with its stock price remaining under pressure.
However, on Thursday, the KOSPI index surged more than 4% at one point during the session, only for gains to quickly narrow to 0.2% before rebounding again to 2%, casting a shadow over the morning's optimism.
Nomura senior strategist Takashi Ito stated, "Although the Middle East situation remains a concern, the market does not believe now is the time for a full-scale exit from equities. The prevailing logic is that investors can continue holding AI and chip stocks—the long-term return expectations for these areas remain very high."
Bloomberg strategist Mark Cranfield also noted that this is a clear signal for investors who preserved their "ammunition" during the KOSPI's 20% pullback from its June peak. He wrote, "Traders will watch for volume above average and whether gains are held into the close to confirm if this constitutes a bullish turning point—the sharp narrowing of gains currently leaves this verification in question."
Kioxia is also in focus. Bain Capital announced the complete sale of its stake in this flash memory chipmaker, sending Kioxia's share price up 10% immediately. Notably, Kioxia's share price has accumulated gains of over 650% year-to-date.
Middle East Tensions: Oil Prices Rise for Third Day, Inflation Fears Reignite
Meanwhile, macro-level pressures have not dissipated.
The U.S. launched a second round of strikes against Iran, pushing Brent crude to a third consecutive day of gains, briefly breaking above $79 per barrel. U.S. Central Command stated on social media that the strikes were "to further degrade its ability to threaten freedom of navigation in the Strait of Hormuz."
Rising oil prices directly fueled inflation concerns. Money markets on Wednesday had already brought forward the expected timing of the next Fed rate hike from December to October.
Veteran strategist Ed Yardeni warned that the breakdown of a U.S.-Iran ceasefire agreement could trigger a new round of accelerating inflation, potentially forcing the Federal Reserve into reactive rate hikes.
However, eToro market analyst Zavier Wong was relatively calm: "We've been through several rounds of escalation and de-escalation, and the market has become accustomed to it. It's not surprising that oil prices are rising on renewed tensions, but current prices are far from the levels seen when this conflict first erupted."
Bond Market: Yields Approach Year-to-Date Highs
Pressure in the bond market is also noteworthy.
The 2-year U.S. Treasury yield, most sensitive to Fed policy expectations, rose 5 basis points to 4.23% during Wednesday's U.S. stock trading session. The 10-year Treasury yield also rose 4 basis points, touching its highest level since late May.
Minutes from the Fed's June 17 meeting showed some officials saw a case for raising rates, although the decision was ultimately to hold steady. The minutes overall reflected that inflation concerns are rising even as labor market worries have eased slightly.
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